Work

Platform Liability and Innovation

Year: 2025

Type: article

Abstract: ABSTRACT We study a platform's incentives to remove IP‐infringing products and the effects of holding the platform liable for such infringements on innovation and welfare. We first show that platform liability can lead to either higher or lower commission rates, depending on how screening affects transaction volume. We then show that liability may spur or hinder innovation, depending on the intensity of cross‐group network externalities, which determines participation elasticities on each side. If platform liability lowers innovation, all market participants—the platform, innovators, imitators, and buyers—are worse off. We also provide a sufficient condition for platform liability to raise welfare.

Source: International Economic Review

DOI: 10.1111/iere.70045

Authors: Doh‐Shin Jeon, Yassine Lefouili, Leonardo Madio

Institutions: Toulouse School of Economics, Université de Toulouse, Université Toulouse Capitole, University of Padua

Language: English

Topic: Digital Platforms and Economics

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Peace, justice, and strong institutions

Open Access status: green

Funder: Agence Nationale de la Recherche